NFIB

Budget Deficit Expected in Fiscal Year That Begins Today
10/01/2001

The federal government's new fiscal year begins today, and many analysts expect the weakened economy and the war on terrorism will produce a budget deficit for the first time in recent history, the New York Times reports.

The Congressional Budget Office forecasts a $121 billion surplus for the fiscal year that ends today, down from last year's $236 billion surplus. Next year, the federal government will either break even or face a deficit as it struggles to pay for a new war and rebuilding efforts following the terrorist attacks, analysts say.

When the economy is weak, costly unemployment claims rise. People who are working earn less money, causing income and payroll taxes to shrink.

Global investment firm Goldman Sachs is projecting a $25 billion deficit for next year, but it says that risks are "skewed heavily toward an even larger budget deficit in the coming year."

Congress this week is expected to begin discussions on specific details of an economic stimulus package. While both parties agree measures must be taken to boost the economy, drastic tax cuts will push the federal government into deeper debt.